Rebound in Exports & Rise in Forex Reserves: Checking the Trend


The negative narrative circulating in the media about Indian exports, especially given the relative slowdown in July this year and the implementation of the GST regime, often selectively looks at the factor of rupee appreciation and external conditions. This was despite the fact that, on the whole, exports had exhibited positive growth for the last 12 months.

The latest data on exports shows that India’s exports had a positive growth in August 2017, growing at approximately 10.3% (in dollar terms) and were valued at $23,818.83 million (or $23.8 billion). In August 2016, exports stood at $21,597.09 million (or $21.5 billion). This is evidence of an export sector rebound in August 2017. (See Figure 1)

Figure 1:

Valued in rupee terms, exports in August 2017 stood at Rs 1,52,365.23 crore as against Rs 1,44,570.03 crore in August 2016. The rate of growth of exports in rupee terms is thus approximately 5.4%. (See Figure 2)

Figure 2:

In cumulative terms, the value of exports stood at $118,574.96 million (or Rs 7,63,145.37 crore) for the April-August period of fiscal 2017-18. For the corresponding period in the last fiscal, exports were valued at $109,215.44 million (or Rs 7,31,420.12 crore). The positive growth in dollar terms is 8.6%. In rupee terms, it is 4.34%. (See Figure 3)

Figure 3:

To look at some details, in August 2017, the following major export commodities groups exhibited positive growth over the corresponding month of the last year (August 2016):

Engineering Goods (19.53%)
Petroleum Products (36.56%)
Organic & Inorganic Chemicals (32.41%)
Drugs & Pharmaceuticals (4.21%)
All Textile RMG (0.56%)

Additionally, non-petroleum and non-gems & jewellery exports for August 2017 were valued at $17,742.94 million as against $15,500.73 million in August 2016. The rate of growth is 14.5% approximately. Exports in the same category were valued at $87,438.57 million for the period of April-August 2017-18 as against $79,622.79 million for the corresponding period in 2016-17. The rate of increase, thus, is 9.82%. (See Figures 4 & 5)

Figure 4:

Figure 5:

Forex Reserves:

The forex reserves of India have achieved a milestone this week, crossing the $400 billion threshold for the first time.

In April 2014, India’s forex reserves had crossed the $300 billion mark. It has taken only three and a half years for the addition of the last $100 billion. Since September 2016, the forex reserves have increased by $30 billion.

According to the opinion of experts and commentators, the current level of forex reserves can finance one full year’s worth of imports and more.

The most fundamental takeaway from any substantial increase in a country’s forex reserves is the ability and instrument it provides said country’s central bank to deal with any volatility or headwinds in the forex market.

It may also be kept in mind that this rise in forex reserves has also happened in a context where India’s external debt situation has also shown marked improvement. The latest issue of a Ministry of Finance annual publication “India’s External Debt: A Status Report 2016-17” shows that  India’s external debt was at $471.9 billion at the end of March 2017, decreasing by $13.1 billion (2.7%) from the level at end-March 2016. Also, at end-March 2017, India’s long-term external debt was $383.9 billion — a decrease of 4.4% over the level at end-March 2016.

India’s  external debt situation improved in 2016-17 compared to 2015-16. This can be seen in the increase of forex reserves cover to debt to 78.4% from 74.3% and a fall in the external debt-GDP ratio to 20.2% from 23.5%.